PLEASANTON, Calif., April 03, 2024 (GLOBE NEWSWIRE) -- Healthcare Triangle, Inc. (NASDAQ:HCTI) ("Healthcare Triangle," "HCTI" or the "Company"), In a pioneering move, a leading health system has partnered with Healthcare Triangle to utilize a groundbreaking cloud-based AI and machine learning solution. This collaboration establishes a revolutionary benchmark in the management and utilization of patient data, ultimately elevating the standards for enhanced care delivery. The deployment of an advanced AI solu ...

Part I [Business](index=8&type=section&id=Item%201.%20Business) The company provides specialized IT solutions including cloud, data, and managed services for the Healthcare and Life Sciences industry - HTI provides IT solutions for the Healthcare and Life Sciences industry, focusing on cloud transformation, data analytics, and EHR services[29](index=29&type=chunk)[30](index=30&type=chunk) - The company's core offerings include proprietary technology platforms: **CloudEz** for multi-cloud management, **DataEz** for data analytics, and **Readabl.ai** for extracting information from unstructured documents using AI/ML[33](index=33&type=chunk)[52](index=52&type=chunk) - HTI's primary revenue is generated from software services and managed services, with a strategic shift towards a **SaaS subscription model** for recurring revenue[35](index=35&type=chunk) - As of December 31, 2023, **SecureKloud Technologies, Inc. owns approximately 59.18%** of the company, making HTI a "controlled company"[36](index=36&type=chunk) - The company has premier partnerships with major public cloud providers including **Amazon Web Services (AWS), Google Cloud, and Microsoft Azure**, as well as EHR vendors[38](index=38&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, dependency on third-party providers, cybersecurity threats, and complex regulations - The company faces **intense competition** from firms with greater financial, technical, and marketing resources, which could lead to loss of clients[73](index=73&type=chunk) - Operations are **heavily dependent on third-party data centers** (AWS, Google Cloud, Microsoft Azure), and any service interruption could significantly harm the business[74](index=74&type=chunk) - As a "controlled company" with its parent owning **59.18% of common stock**, there is a risk of influence over business affairs and exemption from certain Nasdaq governance requirements[77](index=77&type=chunk)[154](index=154&type=chunk) - The business is subject to significant **cybersecurity risks**, including data breaches of confidential healthcare information, which could result in litigation and fines[78](index=78&type=chunk)[80](index=80&type=chunk) - The company operates in a highly regulated healthcare industry and is subject to complex laws like **HIPAA, HITECH, and GDPR**, with non-compliance leading to severe penalties[110](index=110&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Revenue is highly concentrated, with the **top five customers accounting for 77% of revenue** in fiscal year 2023, making the loss of any of these customers a material risk[95](index=95&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[165](index=165&type=chunk) [Cybersecurity](index=39&type=section&id=Item%201C.%20Cybersecurity) The company employs a multi-layered cybersecurity strategy based on the NIST framework, with oversight from the Audit Committee - HCTI utilizes a multi-layer cybersecurity approach based on the **National Institute of Standards and Technology (NIST) framework**, involving a dedicated team and external assessments[165](index=165&type=chunk) - The **Audit Committee provides board-level oversight**, reviewing the cybersecurity program annually and receiving quarterly updates on risks[167](index=167&type=chunk) - The company manages third-party service provider risks by performing risk assessments, requesting **SOC 2 reports**, and incorporating risk assurance into contracts[169](index=169&type=chunk) - Although cybersecurity risks exist, threats such as malware and phishing **have not materially affected the business** to date[171](index=171&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) The company does not own any real estate and leases its primary office in California and a satellite office in New Jersey - The company's principal executive office is leased at 7901 Stoneridge Drive, Suite 220, Pleasanton, CA 94588[172](index=172&type=chunk) - A satellite office is leased at 666 Plainsboro Road, Suite 448, Plainsboro, NJ 08536[172](index=172&type=chunk) - The company does not currently own any real estate[172](index=172&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) As of the report date, the company is not aware of any actual, pending, or threatened litigation - The company has not been made aware of any actual, pending, or threatened litigation[173](index=173&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[174](index=174&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq (HCTI), with no history of dividend payments and plans to retain future earnings - The company's common stock is traded on the Nasdaq Capital Market under the symbol **"HCTI"**[176](index=176&type=chunk) - The company has **never declared or paid a cash dividend** and intends to retain future earnings to finance operations[177](index=177&type=chunk) Equity Compensation Plan Activity | Plan category: | Number of Securities to be issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted Average Exercise Price of Outstanding Options (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 276,500 | $ 3.7 | 1,023,050 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2023 revenue decreased 28% to $33.2 million, net loss widened to $12.3 million, and the company's liquidity position weakened Key Financial Results | | 2023 (In thousands) | 2022 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | $ 33,203 | $ 45,886 | (28)% | | **Cost of revenue** | $ 26,426 | $ 34,591 | (24)% | | **Net (loss)** | $ (12,339) | $ (9,610) | (28)% | - Revenue from the **top 5 customers accounted for 77% of total revenue** in 2023, an increase in concentration from 72% in 2022[222](index=222&type=chunk) - Research and development expenses saw a **significant decrease of 87%** to $0.8 million in 2023 from $5.9 million in 2022[226](index=226&type=chunk) - Depreciation and amortization expenses **increased by 114%** to $7.2 million in 2023, compared to $3.4 million in 2022[230](index=230&type=chunk) - The company's liquidity position has tightened, with the **current ratio decreasing from 1.3 in 2022 to 0.7 in 2023**[241](index=241&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Total revenue fell 28% to $33.2 million in 2023, driven by declines across all service segments and widening the net loss Revenue by Segment | Revenue by Segment | 2023 (In thousands) | 2022 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Software Services | $ 21,132 | $ 25,883 | (18)% | | Managed Services and Support | $ 10,452 | $ 15,178 | (31)% | | Platform Services | $ 1,619 | $ 4,825 | (66)% | | **Total Revenue** | **$ 33,203** | **$ 45,886** | **(28)%** | Operating Profit (Loss) by Segment | Operating Profit (Loss) by Segment | 2023 (In thousands) | 2022 (In thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Software Services | $ (2,507) | $ (1,381) | (82)% | | Managed Services and Support | $ 2,755 | $ 4,481 | (39)% | | Platform Services | $ (649) | $ (4,489) | 86% | | **Total segment operating profit (loss)** | **$ (401)** | **$ (1,389)** | **(71)%** | [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity weakened with a current ratio of 0.7, financing operations through operating cash flows and new debt Liquidity Metrics | Liquidity Metrics | As of Dec 31, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1.2 million | $1.3 million | | Current Ratio | 0.7 | 1.3 | | Debt to Equity Ratio | 9.8 | 0.2 | Cash Flow Summary (In thousands) | Cash Flow Summary (In thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Cash flows used in operating activities | $ (1,612) | $ (2,600) | | Cash flows used in investing activities | $ (13) | $ (3,319) | | Cash flows provided by financing activities | $ 1,518 | $ 5,490 | - In 2023, the company raised funds through a Senior Secured 15% Original Issue Discount Convertible Promissory Note, receiving the **first tranche of $2 million**[247](index=247&type=chunk) [Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The auditor's report includes a "going concern" warning due to operating losses, alongside the consolidated financial statements - The independent auditor's report includes a **"going concern" paragraph**, citing the company's operating losses as raising substantial doubt about its ability to continue operations[256](index=256&type=chunk) Consolidated Balance Sheet (In thousands) | Consolidated Balance Sheet (In thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $ 5,729 | $ 7,749 | | Total Assets | $ 10,049 | $ 20,763 | | Total Current Liabilities | $ 8,123 | $ 6,148 | | Total Liabilities | $ 9,511 | $ 8,375 | | Total Stockholders' Equity | $ 538 | $ 12,388 | Consolidated Statement of Operations (In thousands) | Consolidated Statement of Operations (In thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net Revenue | $ 33,203 | $ 45,886 | | Loss from Operation | $ (11,348) | $ (10,416) | | Net Loss | $ (12,339) | $ (9,610) | | Net loss per share—basic and diluted | $ (2.92) | $ (2.63) | - Subsequent to year-end, the loss of a major customer led to a **non-recurring impairment loss of $3.025 million** on customer relationships and **$1.17 million on goodwill**[308](index=308&type=chunk)[311](index=311&type=chunk)[405](index=405&type=chunk) - In December 2023, the company entered into a securities purchase agreement for up to **$5.2 million in Senior Secured Convertible Promissory Notes** and received the first tranche of $2.0 million[359](index=359&type=chunk)[362](index=362&type=chunk) [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that both disclosure controls and internal controls over financial reporting were effective as of year-end 2023 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2023[407](index=407&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2023[408](index=408&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=89&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The board comprises four directors, three of whom are independent, with established Audit, Compensation, and Governance committees - The board of directors consists of four members, with Dave Rosa as Chairman, and **three of the four directors are determined to be independent**[414](index=414&type=chunk)[428](index=428&type=chunk)[433](index=433&type=chunk) - Anand Kumar was appointed **Interim Chief Executive Officer**, effective March 15, 2024[414](index=414&type=chunk)[418](index=418&type=chunk) - The board has three standing committees: **Audit, Compensation, and Nominating and Corporate Governance**, each composed of independent directors[434](index=434&type=chunk) [Executive Compensation](index=95&type=section&id=Item%2011.%20Executive%20Compensation) This section details compensation for named executive officers, including salary, bonuses, and outstanding equity awards for 2022 and 2023 Summary Compensation Table | Name and Principal Position | Year | Total ($) | | :--- | :--- | :--- | | Thyagarajan Ramachandran (CFO) | 2023 | 295,303 | | | 2022 | 145,317 | | Lakshmanan Kannappan (Head of Strategic Partnership) | 2023 | 216,484 | | | 2022 | 200,008 | | Shibu Kizhakevilayil (Head of M&A) | 2023 | 238,368 | | | 2022 | 256,892 | - The report details outstanding stock option awards for named executive officers as of December 31, 2023, with various exercise prices and expiration dates[447](index=447&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=96&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) SecureKloud Technologies, Inc. is the controlling stockholder with 59.2% beneficial ownership of the company's common stock Beneficial Ownership | Name of Beneficial Owner | Title | Common Stock | Percent of Common Stock | | :--- | :--- | :--- | :--- | | Officers and Directors as a Group | | 108,835 | 2.5% | | SecureKloud Technologies, Inc. | 5% Stockholder | 2,550,000 | 59.2% | - **SecureKloud Technologies, Inc. is the majority owner with 59.2%** of common stock, and is itself 60.7% owned by SecureKloud Technologies Limited, a public company in India[454](index=454&type=chunk) [Certain Relationships and Related Party Transactions, and Director Independence](index=98&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Party%20Transactions%2C%20and%20Director%20Independence) The company engages in significant related party transactions with its parent for services and office space, all charged at cost Transactions with Parent Company | Transaction with Parent (SecureKloud Technologies, Inc.) | 2023 (In thousands) | 2022 (In thousands) | | :--- | :--- | :--- | | Services received under Master Service Agreement | $5,445 | $14,063 | | Services received under Shared Services Agreement | $377 | $197 | | Rent paid under Sublease Agreement | $235 | $180 | - The company also entered into a Master Services Agreement with its Ultimate Parent, receiving services amounting to **$650,000 in 2023**[460](index=460&type=chunk) - The balance receivable from related parties was **$304,000 as of December 31, 2023**, down from $1,075,000 in 2022[461](index=461&type=chunk) [Principal Accountant Fees and Services](index=98&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Total fees paid to the independent auditor, BF Borgers CPA PC, increased to $313,500 in 2023 from $165,875 in 2022 Accountant Fees | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | $ 285,000 | $ 165,875 | | Administrative fees | $ 28,500 | $ - | | **Total fees** | **$ 313,500** | **$ 165,875** | Part IV [Exhibits, Financial Statement Schedules](index=99&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed with the Form 10-K, including financial statements and various corporate agreements

Financial Performance - Net revenue for Q3 2023 was $7,779,000, a decrease of 34.3% compared to $11,950,000 in Q3 2022[21] - Net loss for Q3 2023 was $1,943,000, compared to a net loss of $2,339,000 in Q3 2022, showing an improvement of 15.9%[21] - Net income for the nine months ended September 30, 2023, was a loss of $7,007,000 compared to a loss of $4,747,000 in the same period of 2022[26] - Total revenue for the nine months ended September 30, 2023, was $26,143,000, a decrease of 24% from $34,594,000 in 2022[47] - Revenue for the quarter ended September 30, 2023, decreased by $4.2 million, or 35%, to $7.78 million compared to $11.95 million for the same quarter in 2022[190] Expenses and Costs - Operating expenses for Q3 2023 were $3,231,000, a reduction of 43.1% from $5,675,000 in Q3 2022[21] - Research and development expenses significantly decreased to $54,000 in Q3 2023 from $1,471,000 in Q3 2022, a drop of 96.3%[21] - Sales and marketing expenses increased to $1.1 million, or 14% of total revenue, for the quarter ended September 30, 2023, compared to $1.8 million, or 15%, for the same quarter in 2022[189] - General and administrative expenses for the quarter ended September 30, 2023, were $1.36 million, or 18% of total revenue, compared to $1.48 million, or 12%, for the same quarter in 2022[189] - Interest expenses increased by $0.36 million, or 655% to $0.42 million for the quarter ended September 30, 2023, compared to $0.05 million for the same quarter in 2022[198] Assets and Liabilities - Total assets decreased to $14,466,000 as of September 30, 2023, down from $20,763,000 as of December 31, 2022, representing a decline of 30.5%[19] - Total stockholders' equity decreased to $6,127,000 as of September 30, 2023, down from $12,388,000 as of December 31, 2022, a decline of 50.6%[19] - Total current liabilities increased to $6,852,000 as of September 30, 2023, compared to $6,148,000 as of December 31, 2022, an increase of 11.4%[19] - Cash and cash equivalents fell to $75,000 as of September 30, 2023, down from $1,341,000 as of December 31, 2022, a decrease of 94.4%[19] - Total cash, cash equivalents, and short-term investments decreased to $0.08 million as of September 30, 2023, from $4.14 million as of September 30, 2022[208] Operational Performance - The company reported a loss from operations of $1,524,000 in Q3 2023, compared to a loss of $2,247,000 in Q3 2022, reflecting a 32.2% improvement[21] - For the three months ended September 30, 2023, the total segment operating loss was $108, a decrease of 58% compared to a profit of $260 in the same period of 2022[49] - Software services reported an operating loss of $703 for the three months ended September 30, 2023, which is a 385% increase in loss compared to a loss of $145 in 2022[49] - Managed services and support generated $709 in operating profit for the three months ended September 30, 2023, down 49% from $1,397 in 2022[49] - Platform services saw a significant turnaround with an operating profit of $102 for the three months ended September 30, 2023, compared to a loss of $992 in the same period of 2022, marking a 110% change[49] Customer Concentration - The top customer contributed $4,168, accounting for 54% of revenue for the three months ended September 30, 2023, compared to $4,562 and 38% in the same period of 2022[50][51] - For the quarter ended September 30, 2023, revenue from the top five customers accounted for approximately 78% of total revenue, compared to 76% for the same period in 2022[95] Acquisitions and Goodwill - The Company acquired Cornerstone Advisory Services LLC for a total consideration of $7,000,000, allocated to net working capital of $4,700,000 and intangibles of $2,300,000[107] - The Company recognized a liability for the estimated fair value of contingent consideration related to the acquisition of Devcool, Inc., amounting to $1,487,000[90] - The total purchase price for the acquisition of Devcool Inc. was $7,773,000, which included $4,500,000 in cash and $700,000 in equity[109] - The company recorded $1,289,000 of goodwill from the acquisition, which is not tax deductible[112] Stock and Shareholder Information - Weighted average shares outstanding increased to 4,228,340 in Q3 2023 from 3,602,289 in Q3 2022, an increase of 17.4%[21] - The Company has reserved 600,000 shares of common stock under the "2020 Stock Incentive Plan"[92] - As of September 30, 2023, the Company had nil uninsured cash balances, down from $816,000 as of December 31, 2022[96] - As of September 30, 2023, there was $546 thousand of unrecognized share-based compensation expense related to unvested options, expected to be recognized over approximately two years[143] Future Outlook - The company expects to continue increasing its investment in sales and marketing to support business growth, which may lead to higher expenses in absolute dollar terms[180] - The company anticipates that its employee strength will increase due to investments in scaling the business[163] - The company is currently evaluating the impact of new accounting pronouncements on its consolidated financial statements[130]

Financial Performance - Net revenue for Q2 2023 was $8,526,000, a decrease of 26.6% compared to $11,588,000 in Q2 2022[22] - For the six months ended June 30, 2023, revenue was $18,364,000, down 19% from $22,644,000 in the same period of 2022[48] - Revenue for the quarter ended June 30, 2023, decreased by $3 million, or 26%, to $8.5 million compared to $11.5 million for the same quarter in 2022[186] - The operating loss for the three months ended June 30, 2023, was $(1,595,000), an increase in loss of 11% from $(1,433,000) in the same period of 2022[49] - The total segment operating profit decreased by $0.49 million, or 65%, to $0.26 million for the quarter ended June 30, 2023, compared to $0.75 million for the same quarter in 2022[201] Assets and Equity - Total assets decreased to $16,068,000 as of June 30, 2023, down from $20,763,000 as of December 31, 2022, representing a decline of 22.5%[20] - Total stockholders' equity decreased to $8,051,000 as of June 30, 2023, down from $12,388,000 at the end of 2022, a decline of 34.8%[20] - As of June 30, 2023, the company reported total intangible assets of $16,473,000, with net carrying amounts of $8,921,000 after accumulated amortization[98] Cash Flow and Expenses - Cash and cash equivalents dropped to $132,000 at the end of Q2 2023, down from $1,341,000 at the end of 2022, a decrease of 90.2%[20] - The company experienced a net cash used in operating activities of $(2,826,000) for the six months ended June 30, 2023, compared to $602,000 provided in the same period of 2022[28] - Cash inflow from financing activities was $1.6 million for the six months ended June 30, 2023, compared to $1 million for the same period in 2022[212] Customer Concentration - The top customer contributed $4,519,000, accounting for 53% of total revenue for the three months ended June 30, 2023, compared to 39% in the same period of 2022[50][51] - For the quarter ended June 30, 2023, revenue from the top five customers accounted for approximately 81% of total revenue, compared to 73% for the same quarter in 2022[94] Research and Development - Research and development expenses were $102,000 in Q2 2023, significantly lower than $646,000 in Q2 2022, reflecting a decrease of 84.2%[22] - The company’s research and development expenses primarily consist of employee-related costs for software developers and engineers, aimed at enhancing cloud-based platform applications[174] Debt and Liabilities - The company has a credit facility from Seacoast business funding with a balance of $2,352 thousand as of June 30, 2023, compared to $3,212 thousand at December 31, 2022[120] - The debt-to-equity ratio increased to 0.45 for the quarter ended June 30, 2023, compared to 0.20 for the quarter ended December 31, 2022[203] Stock and Equity Compensation - The company has reserved 600,000 shares under the "2020 Stock Incentive Plan" for stock-based compensation[91] - As of June 30, 2023, the company had 84,356 unvested options with a weighted average grant date fair value of $3.7 per option, and $309 thousand of unrecognized share-based compensation expense related to these options[141][142] Legal and Regulatory - The company has not been involved in any legal proceedings that could materially affect its financial condition[132] - The company is currently evaluating the impact of new accounting pronouncements on its consolidated financial statements[129] Business Strategy and Market Position - The company continues to focus on digital transformation and cloud solutions for the healthcare sector, leveraging technologies such as AI and Big Data[30] - Healthcare Triangle, Inc. is in the early stages of marketing its SaaS offerings, including DataEz, CloudEz, and Readabl.AI, with uncertain impacts on future revenue growth[164] - The company anticipates increasing its employee strength due to investments in sales and marketing to promote solutions in various geographies[162]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number 001-40903 HEALTHCARE TRIANGLE, INC. (Exact name of registrant as specified in its charter) Delaware 84-3559776 (State or o ...

Market Growth Projections - The US healthcare cloud transformation services market is projected to grow to $30 billion by 2027, with a CAGR of 17.4%[35]. - The global market for healthcare data science and analytics is estimated to reach $40 billion by 2025, with a CAGR of 23.5%[35]. - The US healthcare IT services market is expected to be $149 billion by 2025, with a CAGR of 11.7%[35]. - The medical document management market is projected to be $555 million by 2025[35]. Company Offerings and Partnerships - The company is in the early stages of marketing its SaaS offerings, CloudEz, DataEz, and Readabl.AI, which are expected to provide recurring revenues[30]. - The company has established partnerships with major cloud providers, including AWS, Google Cloud, and Microsoft Azure, enhancing its service capabilities[33]. - The proprietary platforms, CloudEz and DataEz, are designed to address challenges in data management and interoperability in the healthcare sector[42][46]. - DataEz platform is a cloud-based data analytics and data science platform specifically designed for large Life Sciences and healthcare organizations, enabling secure analysis and transformation of data from various sources[56]. Service Utilization and Recognition - HTI's healthcare IT services are utilized by over 100 hospitals across the US, including EHR implementation and optimization, managed services, and interoperability assessments[65]. - HTI is among the few MEDITECH READY-certified implementation partners, having successfully implemented and optimized the MEDITECH platform for hundreds of clients[66]. - The company is recognized as a top-tier partner in the AWS Healthcare and Life Sciences competency program, among over 100,000 partners globally[33]. Financial Performance and Risks - In the fiscal year ended December 31, 2022, the top customer accounted for 39% of revenue, and the top five customers accounted for 73% of revenue, indicating significant revenue concentration risk[92]. - The company has experienced rapid growth, with an increase in revenues, customer count, and product offerings, but must effectively manage this growth to avoid operational difficulties[83]. - The sales cycle for the company's products can be lengthy and unpredictable, which may cause fluctuations in revenue and operating results[90]. - The company faces competition from larger firms with greater resources, which could impact its market share and revenue growth[69]. Cybersecurity and Compliance Challenges - Cybersecurity risks are heightened, with potential breaches leading to operational disruptions, reputational harm, and significant costs for remediation[78]. - The company has implemented security measures against cyber-attacks, but these may be insufficient, leading to unauthorized access and data breaches[76]. - The company is subject to numerous privacy and data security laws, and failure to comply could result in significant harm to its reputation and financial condition[108]. - The company must navigate complex compliance issues related to evolving privacy laws, such as the GDPR and CCPA, which may increase costs and liabilities[113][112]. Regulatory Environment and Industry Dynamics - The healthcare regulatory environment is expected to undergo significant changes, which could adversely affect the company's growth and operations[124]. - Increased government involvement in healthcare could adversely impact the company's business and financial condition due to potential changes in reimbursement rates and investment deferrals by clients[118]. - The competitive landscape for healthcare solutions is intensifying, with established competitors having greater resources, which could adversely affect the company's market position[116]. Intellectual Property and Legal Risks - The company may incur significant costs to monitor and protect its intellectual property rights, which could distract management and impact customer relationships[99]. - The company faces potential litigation for infringing on the intellectual property rights of others, which could be costly and time-consuming[100]. - The use of third-party open-source software could expose the company to litigation and compliance risks, potentially harming its business[104]. Operational and Management Considerations - Recent changes in the senior management team, including the resignation of the former CEO, could create uncertainty and disrupt business operations[85]. - The company must continue to adapt to evolving technologies and introduce new products to avoid obsolescence and maintain market relevance[86]. - The company relies on strategic relationships to enhance market presence and product acceptance, and losing these relationships could adversely impact its business[89]. Financial and Stock Market Considerations - The company has received a deficiency letter from Nasdaq regarding compliance with listing requirements, with a deadline to regain compliance by May 30, 2023[154]. - The company submitted a compliance plan to Nasdaq after failing to meet independent director requirements, which was accepted, granting an extension for compliance[155]. - The company has never declared or paid any cash dividends on its common stock and does not expect to do so in the foreseeable future[179]. - The trading market for the company's common stock may be adversely affected if analysts publish unfavorable research[164]. Revenue and Expense Management - For the twelve months ended December 31, 2022, the company generated revenues of approximately $45.9 million, an increase of $10.6 million or 30% compared to $35.2 million for the same period in 2021[190]. - The company aims to shift revenue towards recurring and subscription-based models over time, as software services typically have lower gross margins[205]. - Research and development expenses are expected to increase in absolute dollars as the company focuses on developing new product offerings[217]. - General and administrative expenses are expected to rise to support business growth, although they may decrease as a percentage of revenue over the long term[221].

Financial Performance - Net revenue for Q3 2022 was $11,950,000, representing a 48.5% increase from $8,078,000 in Q3 2021[20] - Net loss for Q3 2022 was $2,339,000, compared to a net loss of $1,992,000 in Q3 2021[20] - For the nine months ended September 30, 2022, the net loss was $4,747,000 compared to a net loss of $2,504,000 in the same period of 2021, indicating a deterioration in financial performance[25] - Total revenue for the nine months ended September 30, 2022, was $34,594,000, representing a 33% increase from $26,081,000 in the same period of 2021[43] - The company reported a net loss before income tax of $2,302,000 for the three months ended September 30, 2022, compared to a loss of $1,991,000 in the same period of 2021, reflecting a 16% increase in losses[44] Assets and Liabilities - Total assets as of September 30, 2022, increased to $24,864,000 from $24,613,000 as of December 31, 2021[18] - Cash and cash equivalents rose to $4,144,000 from $1,770,000, indicating a significant liquidity improvement[18] - Total current liabilities decreased to $5,060,000 from $6,251,000, reflecting a reduction of 19.1%[18] - Total stockholders' equity increased to $17,577,000 as of September 30, 2022, from $16,135,000 at the end of 2021[18] - The balance of short-term borrowing as of September 30, 2022, was $2,453, compared to nil for the period ended December 31, 2021[120] Revenue Segmentation - The company operates in three distinct segments: Software Services, Managed Services and Support, and Platform Services, allowing for targeted resource allocation and performance assessment[39][40] - Software Services revenue for the three months ended September 30, 2022, increased to $6,177,000, a 168% increase from $2,307,000 in the same period of 2021[43] - Managed Services and Support revenue decreased by 21% to $3,708,000 for the three months ended September 30, 2022, compared to $4,673,000 in the same period of 2021[43] - Platform Services revenue increased by 88% to $2,065,000 for the three months ended September 30, 2022, compared to $1,098,000 in the same period of 2021[43] Expenses - Operating expenses totaled $5,675,000 in Q3 2022, an increase from $4,496,000 in Q3 2021[20] - Research and development expenses for Q3 2022 were $1,471,000, down from $2,204,000 in Q3 2021[20] - Sales and marketing expenses increased by $0.49 million, or 37%, to $1.82 million for the quarter ended September 30, 2022, compared to $1.33 million for the same quarter in 2021[195] - General and administrative expenses increased by $0.73 million, or 97%, to $1.48 million for the quarter ended September 30, 2022, compared to $0.75 million for the same quarter in 2021[196] - Depreciation and amortization expenses increased by $0.70 million, or 331%, to $0.91 million for the quarter ended September 30, 2022, compared to $0.21 million for the same quarter in 2021[198] Cash Flow and Investments - Cash flows from operating activities showed a net cash used of $372,000 for the nine months ended September 30, 2022, compared to $3,878,000 used in the same period of 2021, reflecting an improvement in operational cash flow[25] - The company invested $3,279,000 in intangible assets during the nine months ended September 30, 2022, compared to no investments in the same period of 2021, highlighting a focus on growth and development[25] - The company reported an increase in additional paid-in capital of $5,888,000 during the nine months ended September 30, 2022, compared to no increase in the same period of 2021, indicating strong investor confidence[25] Customer Concentration - The top five customers contributed 76% of total revenue for the three months ended September 30, 2022, with Customer 1 alone accounting for 38% at $4,562,000[45] - For the quarter ended September 30, 2022, sales to the top five customers accounted for approximately 76% of total revenue, down from 79% in the same quarter of 2021[89] - Accounts receivable from the five major customers accounted for approximately 62% of total accounts receivable as of September 30, 2022, compared to 88% in the prior year[89] Acquisitions and Growth Strategy - The Company acquired Cornerstone Advisory Services LLC for a total consideration of $7,000, allocated to net working capital of $4,700 and intangibles of $2,300[106] - The acquisition of Devcool, Inc. had an aggregate purchase price of $7,773, with $1,289 recorded as goodwill[108] - The company is in the early stages of marketing its CloudEz, DataEz, and Readabl.AI platforms as SaaS offerings, which are expected to provide recurring revenues[157] Tax and Legal Matters - The effective tax rate for the quarter ended September 30, 2022 was 2%, compared to 0% for the same quarter in 2021[126] - The Company’s federal and state income tax returns are subject to examination for three years from the original filing deadline[128] - The Company has no ongoing legal proceedings that are expected to materially affect its financial condition[131]

Financial Performance - Net revenue for the three months ended June 30, 2022, was $11,588,000, representing a 15.3% increase from $10,050,000 in the same period of 2021[21] - The company reported a net loss of $405,000 for the three months ended June 30, 2022, compared to a net income of $304,000 in the same period of 2021[21] - Total revenue for the six months ended June 30, 2022, was $22,644, representing a 26% increase from $18,003 in 2021[64] - Revenue for the quarter ended June 30, 2022, increased by $1.5 million, or 15%, to $11.6 million compared to $10.1 million for the same quarter in 2021[193] - Revenue from Software Services increased by $3.4 million, or 105%, to $6.6 million for the quarter ended June 30, 2022, compared to $3.2 million for the same quarter in 2021[205] - Revenue from Managed Services and Support decreased by $1.4 million, or 26%, to $3.9 million for the quarter ended June 30, 2022, compared to $5.3 million for the same quarter in 2021[205] - Revenue from Customer 1 decreased by $0.2 million, or 2%, to $8.3 million for the six months ended June 30, 2022, compared to $8.5 million for the same period in 2021[214] Expenses and Liabilities - Operating expenses for the six months ended June 30, 2022, totaled $9,460,000, an increase of 64.5% compared to $5,774,000 for the same period in 2021[21] - Cost of Revenue (exclusive of depreciation/amortization) increased by $1.7 million, or 26%, to $8.4 million for the quarter ended June 30, 2022, compared to $6.7 million for the same quarter in 2021[208] - General and Administrative expenses increased by $0.4 million, or 38%, to $1.4 million for the quarter ended June 30, 2022, compared to $1 million for the same quarter in 2021[200] - Research and Development expenses decreased by $0.2 million, or 21%, to $0.6 million for the quarter ended June 30, 2022, compared to $0.8 million for the same quarter in 2021[198] - Sales and Marketing expenses increased by $0.8 million, or 105%, to $1.6 million for the quarter ended June 30, 2022, compared to $0.8 million for the same quarter in 2021[199] - The company’s total liabilities decreased slightly to $8,283,000 as of June 30, 2022, from $8,478,000 as of December 31, 2021[19] Assets and Equity - Total current assets decreased to $8,578,000 as of June 30, 2022, down from $11,804,000 as of December 31, 2021, reflecting a decline of 27.5%[19] - Total stockholders' equity decreased to $14,106,000 as of June 30, 2022, down from $16,135,000 as of December 31, 2021, a decline of 12.6%[19] - The accounts receivable balance as of June 30, 2022, was $6,547, down from $9,672 at the end of 2021[71] - The net intangible assets increased to $11,005,000 as of June 30, 2022, from $10,458,000 in 2021, marking an increase of approximately 5.2%[99] Shareholder Information - The weighted average shares outstanding for basic net income per common share was 35,484,290 for the three months ended June 30, 2022, compared to 29,579,405 for the same period in 2021[21] - Basic earnings per share (EPS) for the three months ended June 30, 2022, was $(0.011), consistent with the diluted EPS of $(0.011), while the basic EPS for the same period in 2021 was $0.011[153] - The Company issued 807,500 Incentive Stock Options (ISO) at an exercise price of $0.40, vesting over four years, with the first 25% vesting on the one-year anniversary of the grant[142] - As of June 30, 2022, the balance of outstanding stock options was 1,866,219, with 2,133,781 shares available under the equity compensation plan[147] Acquisitions and Investments - The company acquired Devcool Inc. for a purchase price of $7.7 million on December 10, 2021, enhancing its capabilities in solving complex technology problems in the healthcare industry[29] - The acquisition of Devcool, Inc. was completed for a total purchase price of $7,773, with $1,289 recorded as goodwill[114] Market and Operational Insights - The company operates in three distinct reportable segments: Software Services, Managed Services and Support, and Platform Services, focusing on optimizing healthcare IT infrastructures[41][42] - The impact of COVID-19 has not materially affected the company's financial condition, but it has accelerated the adoption of digital solutions in the healthcare sector[33] - The Company aims to enhance its solutions and services to support healthcare delivery organizations and improve operational efficiencies[158] Future Outlook - Research and development expenses are expected to increase in absolute dollars as the Company focuses on developing new product offerings[180] - Sales and marketing expenses are anticipated to continue increasing in absolute dollar terms to support business expansion[182] - General and administrative expenses are expected to rise to support business growth, although they may decrease as a percentage of revenue over the long term[184]

Financial Performance - Net revenue for the three months ended March 31, 2022, was $11,056,000, representing a 39.4% increase from $7,953,000 in the same period of 2021[24]. - The cost of revenue for the same period was $8,162,000, up 41.5% from $5,773,000 year-over-year[24]. - Net loss for the three months ended March 31, 2022, was $2,011,000, compared to a net loss of $814,000 in the prior year, indicating a significant increase in losses[24]. - The company reported a total revenue of $11,056,000 for the three months ended March 31, 2022, compared to $7,953,000 for the same period in 2021, representing an increase of approximately 39%[56]. - Revenue increased by $3 million, or 39%, to $11.1 million for the quarter ended March 31, 2022, compared to $7.95 million for the same period in 2021[210]. - Net income for the quarter ended March 31, 2022, was a loss of $2.011 million, or 18% of total revenue, compared to a loss of $814,000, or 10% of total revenue, for the same period in 2021[209]. Revenue Breakdown - Revenue from the top five customers accounted for 76% of total revenue in Q1 2022, with Customer 1 contributing $3,833,000 (35%) and Customer 2 contributing $1,965,000 (18%)[57]. - For the quarter ended March 31, 2022, sales to the top five customers accounted for approximately 76% of total revenue, down from 83% in the same quarter of 2021[104]. - Software Services revenue increased by 100% to $5,456,000 in Q1 2022 from $2,725,000 in Q1 2021[72]. - Managed Services and Support revenue slightly increased by 1% to $4,269,000 in Q1 2022 compared to $4,226,000 in Q1 2021[72]. - Platform Services revenue grew by 33% to $1,331,000 in Q1 2022 from $1,002,000 in Q1 2021[72]. - Managed Services and Support revenue decreased by $2.1 million, or 73%, to $0.8 million for the quarter ended March 31, 2022, compared to $3 million for the same period in 2021[214]. - Platform Services revenue decreased by $0.5 million, or 100%, to nil for the quarter ended March 31, 2022, compared to $0.5 million for the same period in 2021[215]. Expenses and Costs - Research and development expenses increased to $1,066,000 for the three months ended March 31, 2022, compared to $757,000 in the same period of 2021, marking a rise of 40.8%[24]. - Sales and Marketing expenses increased to $1.740 million, or 16% of total revenue for the quarter ended March 31, 2022, compared to 8% in the same quarter of 2021[209]. - General and Administrative expenses were $1.351 million, or 12% of total revenue for the quarter ended March 31, 2022, compared to 16% in the same quarter of 2021[209]. - Cost of revenue increased by $2.3 million, or 41%, to $8.2 million for the quarter ended March 31, 2022, compared to $5.7 million for the same quarter in 2021[216]. - Research and Development expenses rose by $0.3 million, or 41%, to $1 million for the quarter ended March 31, 2022, compared to $0.7 million for the same quarter in 2021[218]. - Sales and Marketing expenses increased by $1 million, or 161%, to $1.7 million for the quarter ended March 31, 2022, compared to $0.7 million for the same quarter in 2021[219]. - General and Administrative expenses increased by $0.1 million, or 7%, to $1.3 million for the quarter ended March 31, 2022, compared to $1.2 million for the same quarter in 2021[220]. Assets and Liabilities - Total assets decreased to $22,267,000 as of March 31, 2022, down from $24,613,000 at the end of 2021, reflecting a decline of 9.5%[22]. - Total stockholders' equity fell to $14,499,000 as of March 31, 2022, down from $16,135,000 at the end of 2021, a decrease of 10.1%[22]. - The company reported a cash and cash equivalents balance of $1,562,000 at the end of March 31, 2022, down from $1,770,000 at the end of 2021, a decrease of 11.8%[28]. - Accounts Receivable decreased to $6,739,000 as of March 31, 2022, down from $9,672,000 as of December 31, 2021[75]. - The company has a current liability of $2,209,000 related to short-term borrowing as of March 31, 2022[129]. Acquisitions and Investments - The company acquired Devcool Inc. for a purchase price of $7.7 million, which is expected to enhance its technology capabilities in the healthcare sector[33]. - The company acquired Cornerstone Advisory Services LLC for a total consideration of $7,000,000, allocated to net working capital of $4,700,000 and intangibles of $2,300,000[123]. - The acquisition of Devcool, Inc. had an aggregate purchase price of $777,293, including cash payments and equity issuance[125]. - The company recorded a total purchase price of $7,773,000 for recent acquisitions, including $1,289,000 of goodwill which is not tax deductible[129]. Employee and Stock Options - The Company has a total of 73 full-time employees and 261 sub-contractors, including 170 certified cloud engineers and 104 Epic Certified EHR experts[172]. - The Company issued 100,000 shares for services rendered and 149,701 shares for employee stock options, recognizing expenses of $350,000 during the quarter ended March 31, 2022[131]. - The Company issued 807,500 Incentive Stock Options (ISO) at an exercise price of $0.40, vesting over a four-year period[158]. - The Company issued 452,000 Non-Qualified Stock Options (NSO) at an exercise price of $0.40 per option, vesting over a four-year period[159]. - The Company recognized compensation expenses related to ISO/NSO stock options of $14,000 for the three months ended March 31, 2022, and $14,000 for the same period in 2021[165]. Tax and Regulatory Matters - The company recognized total income tax expenses of $21,000 for the quarter ended March 31, 2022, compared to $3,000 for the same period in 2021[145]. - The Company has reported a net deferred tax asset of $0 as of March 31, 2022, after accounting for a valuation allowance of $533,000[144]. - The Company received a PPP loan amounting to $1.1 million, which is forgivable under certain conditions[177]. - The company has applied for a waiver for its Payroll Protection Program loan and is awaiting approval, with interest recognized at a rate of 1% per annum[138]. Future Outlook and Strategy - The company focuses on leveraging technologies such as Big Data, AI, and Machine Learning to improve healthcare outcomes and operational efficiencies[32]. - The company aims to address interoperability challenges in healthcare systems, enhancing digital infrastructure for hospitals and health systems[34]. - The company anticipates that the shift to virtual approaches will create unique opportunities for growth in cloud technology and services[37]. - The Company is in the early stages of marketing its CloudEz, DataEz, and Readabl.AI platforms as SaaS offerings, which are expected to provide recurring revenues[174]. - The company is classified as an "emerging growth company" and will remain so until certain revenue or debt thresholds are met, potentially until December 21, 2026[46].